State-run Steel Authority of India Ltd. (500113.BY) Friday signed an initial
agreement with the government of Mongolia to explore the possibilities for
setting up a steel plant and mining iron ore and coking coal in the landlocked
Central Asian country.

The Ministry of Mineral of Mongolia will
provide information on iron-ore and coal deposits in Mongolia to the company
and will offer options of locations and size for the steel-making facility, a
Steel Authority statement said.

The Indian delegation led by C.S.
Verma, Chairman of Steel Authority of India (SAIL) and U.P. Singh, Joint
Secretary in the Ministry of Steel, is signed an agreement.

“We are signing an MoU with the
Mongolian government for allocation of some coking coal mine. We have been
talking about this for about a year,” The Hindu quoted Verma as saying.

“Mongolia has very good quality
of coking coal mines. We do not have such quality coal mines ourselves. Let
Mongolian government allocate some good coking coal mine and we will have
reciprocal arrangement to set up a steel plant there,” he said.

In exchange for the coal mine
acquisition, India has proposed to construct a steel plant in Mongolia, the
country”s first ever plant.

“We will be too keen to get
good volumes, good coal mine with lot of reserves, so that we feed the steel
plant which we will be setting up there and the surplus will be brought to
India,” Verma said.

The coal mine India targets to
acquire should be able to meet the requirement of the proposed steel plant. The
coal will first be used to power the plant. An excess will then be transported
to India.

The mine and expected quantity of
the coal will be drawn out after the MoU has been signed.

India is fast tracking the
acquisition of coal mines overseas in order to support plans of its steel
industry to increase production from the current 80 MT to 200 MT by 2020. To
produce one tonne of steel alone already requires 0.9 tonne of coking coal.
Unfortunately, India lacks quality coking coal mines at home.

India, which imports 35 MT of coking
coal every year, mostly sources 60 per cent to 70 per cent of these from
Australia, while the rest comes from the US and New Zealand.

However, Australian coking coal
price is already excessively expensive, going up from $125 per tonne in 2010 to
$350 per tonne in 2011, Verma said.

Currently, Australian coking coal is
priced between $200 per tonne and $210 per tonne.

Source: (IBTimes)